Took a different course
Russian investments in US government debt continue to show a systematic reduction. So, in June of this year, the volume of investments in American bonds by the Russian Federation amounted to $ 10.848 billion. Of this amount, $ 5.296 billion falls on long-term securities, and $ 5.552 billion - on short-term ones. This is evidenced by data on the website of the United States Department of the Treasury.
For comparison, in May 2019, Russian investments amounted to $ 12.024 billion. And in October 2010, Russian ownership of the US public debt amounted to $ 176.3 billion. At the same time, Russia began to get rid of US securities most actively in the spring of 2018 - by the summer it had reduced its investment of almost $ 80 billion - from $ 96 billion to about $ 14.9 billion. And now, Russian capital is not even in the thirty countries that are major holders of government securities in the United States.
An economist, a teacher at the Russian Presidential Academy of National Economy and Public Administration under the President of Russia Vladislav Ginko, explained this trend with the foresight of the Central Bank of the Russian Federation. Indeed, the main share of investments belongs to him (the rest is distributed between commercial banks and private investors).
Ginko noted that in this way the Central Bank protects its capital in the face of uncertainty in the interest rate of the Federal Reserve System of the United States.
“After all, all holders of US debt securities may face the fact that there will be no income at all. It turns out that you invest $ 100, and as a result take away in a year $ 98. Therefore, the policy of our Central Bank is very timely, ”remarked RT Vladislav Ginko.
The head of the Central Bank Elvira Nabiullina previously also explained the tendency to reduce investments by diversification and the issue of reliability of storage.
“We are pursuing a policy so that reserves are securely stored and diversified. We evaluate all risks - financial, economic, geopolitical, making a decision on the allocation of funds, ”she said.
Threat of sanctions
Moreover, it is geopolitical risks, according to Vladislav Ginko, that play the largest role in making decisions on investments in the US public debt.
“Earlier, Russia also had big investments in public debt. But then the Russian Federation began to worry that the amount could be frozen and not returned to it if tougher sanctions were imposed by Washington. We always considered them illegal, they are illegal even from the point of view of the American legal system. Accordingly, we understand that global risks are growing, so we see that Russia is currently one of the leaders in gold reserves, ”the source said.
In addition, he pointed to the provocative political actions of the Americans, which undermine financial stability, including his own.
“The US economic immunity is so weak that they begin to treat the common cold with heavy antibiotics. Antibiotics here are a sharp drop in interest rates. The situation is critical in the economic sphere, ”Ginko summed up.
- US Federal Reserve Building (FRS) in Washington
- © Brendan McDermid
Waiting for hesitation
In turn, the head of the Finance and Economics department of the Institute for Contemporary Development, an economist Nikita Maslennikov, noted that the Central Bank may expect an increase in bond yields, in order to buy them later.
“The Central Bank acts confidently in the market: profitable - sold, profitable - bought. Profitability will begin to increase (and with increasing profitability, the market price will decrease), it will be possible to buy, and then wait for the next swing. In general, the situation is quite nervous due to the fact that the subsequent actions of the Federal Reserve System remain in the zone of uncertainty ... Many people believe that the uncertainty in the markets and the consequences of the trade war with China are signs of a new global recession, ”said RT Maslennikov.
In this regard, he agrees with Ginko about the appropriateness of the Central Bank's actions to diversify its capital.
“We are buying gold, because we believe that this is some kind of safe asset in the event of a“ doomsday financial day ”. And this assumption is generally true, although the fluctuation in gold prices is also quite high, ”the economist said.
In addition, Maslennikov pointed out that Russia also has settlements in Chinese yuan, euros, yen, pounds and reserve currencies of the second tier.
“Because these currencies are present in the structure of international trade payment turnover and are in demand for our exporters and importers who make settlements in these currencies,” the source said.
Breaks the record
Meanwhile, US government debt is at a record level for itself, exceeding the mark of $ 22 trillion. At the same time, the promises of President Donald Trump to lower him have not yet been crowned with success. Moreover, public debt continues to increase.
At the end of 2017, its size exceeded 100% of GDP, and the International Monetary Fund predicts that by 2023 this figure could grow to 117% of GDP. At the same time, the budget deficit is growing. So, according to the results of 2018, it amounted to 3.8% of GDP, although back in 2017 it was at the level of 3.5% of GDP. In the first nine months of the current fiscal year alone, the US budget deficit amounted to $ 746 billion.
In this regard, experts say, raising the public debt ceiling is the only way the United States can avoid default.